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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: The Phoenix who wrote (42414)	11/6/2000 3:36:09 PM
From: GVTucker	Read Replies (1) \| Respond to of 77398

Gary, seems to me from your perspective that a low risk trade would be long CSCO, short JNPR. True?

To: The Phoenix who wrote (42414)	11/6/2000 3:45:13 PM
From: Eski	Read Replies (1) \| Respond to of 77398

Gary What time csco reports?

To: The Phoenix who wrote (42414)	11/6/2000 3:47:30 PM
From: FESHBACH_DISCIPLE	Read Replies (2) \| Respond to of 77398

How much of that 500 million is operating related because the rest deserve a 16 multiple (inverse of treasury yields)? The math don't work.

To: The Phoenix who wrote (42414)	11/6/2000 3:49:27 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 77398

CSCO generates $500M in postive cash flow each month. If you owned the company you could pocket that... Not true. Here's why: their cash flow (last 10-K) included about $2.5 billion in "tax benefits" from the govt. for options exercised by their employees (regarded as compensation by govt, so employees pay taxes to govt and govt gives tax credit to co...only Wall St. does not regard this as compensation so Cisco does not have to deduct options as compensation from income statement). If you owned all of Cisco, there would be no employee options. That means right off the bat your cash flow would be reduced to 6BB - 2.5BB = 3.5BB. To make matters worse, the new non-owner Cisco employees would probably demand higher wages now that they would no longer receive options (since you the buyer own 100% of the co.). So you would have to pay them higher cash wages, thereby increasing your expenses and reducing your net free cash. This will reduce the 3.5BB by some undetermined amount. I think it could wipe the whole amount out (wild guess), but in any case, the net result would be less than half the current 500MM a month, in my opinion. So much for the cash flow "dividend" you would pay yourself. So what about the sum of the parts which you believe exceeds 400BB? Well, maybe in the public market you (or Cisco right now, for that matter) could sell off the pieces for a greater amount; maybe not. But to a cash buyer who intends to hold the operation for its cash-producing potential, the low expected cash flow from Cisco as a private (non-options machine) company would not support such a value. Certainly, it would be near impossible to take private as an LBO--due to poor cash flow expectations, not just due to the high valuation. All this gets back to the reality of the situation, which is that Cisco's stock-cum-currency is truly an integral part of its business. Even if somebody could afford to take it private, they would end up destroying Cisco's valuable public (stock) currency, and Cisco as we all know it would cease to exist. Although that is a pretty unlikely scenario, it is an interesting thought experiment to imagine "life without Cisco". I imagine housing in San Jose could become affordable again (well, maybe :).